System Costs & Incentives

Net Metering

Solar Basics

What is Solar Electricity?

Photovoltaic (PV): photo = light, voltaic = produces voltage

Photovoltaic (PV) systems, also referred to as solar electric systems, convert sunlight directly into usable electricity in your home or business using semiconductor technology. Sunlight strikes the PV cells and cause the electrons to flow, creating an electrical current (photovoltaic effect).

Basic PV Terminology

DC: Direct current (produced by solar panels)

AC: Alternating current (used in the homes, businesses and industry)

Efficiency: Measure of how much of the sunlight is converted to electricity (%)

Capacity: Total amount of power that a system produces

Watt: Basic unit of power

Kilowatt: A unit of electrical power equal to 1,000 watts (most common measurement)

Kilowatt-Hour: Basic unit of energy. The use of 1,000 watts of electricity for one full hour (basic unit of electrical usage billing)

What is a watt?

The basic unit of power. Solar panels and light bulbs are both rated in watts.

What is a kilowatt-hour?

The basic unit of energy. Energy = Power x Time.

Example: If ten 100-watt light bulbs are left on for one hour, the energy consumed is 1 kWh (100 w x 10 = 1 kWh).

How Does solar PV Work?

For systems offsetting just a single meter and using NEM, the graphic below explains how solar electricity is produced, where the energy flows and the bill crediting mechanism known as "net energy metering."

The DC electricity goes to an inverter that transforms it into alternating current (AC) for use at your site.

The utility meter records the net amount of energy (in kilowatt-hours or kWh) consumed. When the system creates more electricity than needed on-site, the meter will “spin backward” and the excess electricity is released onto the electric grid and “credited” to your utility account. These credits help offset the cost of kWh usage at night or on cloudy days when PV systems are not producing as much electricity.

For systems offsetting multiple tenant and/or common area meters and using VNEM, the graphic below explains how solar electricity is produced, where the energy flows and the bill crediting mechanism known as “virtual net energy metering.”VNEM is where all of the solar electricity is sent back to the grid, and then virtually allocated out to each of the benefitting utility accounts.

System Design

What size system should I install on my home or business?

Every site is different and the needs of system owners vary. System size depends on several factors, including how much electricity (kWh) is consumed on-site, the system’s orientation and tilt, the available space for the system and financial considerations.

Remember that you do not have to offset 100% of the consumption of your business. Offsetting any portion can be beneficial and a good way to get started with solar.

Always check with a licensed installer or contractor to determine the true optimal size of your system for the portion of your consumption that you wish to offset with solar.

How efficient are photovoltaic modules?

Photovoltaic panel efficiencies range from 5% for some thin-film technologies up to 22% for single crystalline (rigid) technologies. These percentages refer to the conversion efficiency, or the percentage of sunlight that is converted directly into electricity. Conversion efficiency is a critical issue when space is limited as more efficient panels require less space to produce the desired amount of electricity.

Where should I put my panels?

PV panels are typically installed on your roof but also can be mounted on the ground. Speak with your contractor about where on your property will yield the highest production based on the availability of direct sunlight. Typically, the ideal direction to have your panels face is south or west.

What are the components of my system?

This is a list of components that may be included in your PV system.

Solar panels/modules – The devices to collect the sun’s power and produce direct current (DC) power.

Inverter – Converts DC power into alternating current (AC) power. There are two types of inverters: central and micro.

Service/utility meter – This meter is a bidirectional smart meter that can keep track of any excess kWh production that you may send back to the grid.

Kilowatt-hour meter – This meter keeps track of the kilowatt-hours your system has produced since the system was turned on. Note: Not all systems have a kilowatt-hour meter installed. They are also referred to as generation meters.

AC disconnect - This is a device that the utility can use to turn off your PV system in an emergency or service situation. Note: Not all systems have an AC disconnect.

PV panels usually come with a 25-year production warranty. A central inverter is often covered by a 10-year warranty, while microinverters are generally warranted for 25 years. Most central inverter manufacturers offer a supplementary 10-year extended warranty at an additional cost.

Should my contract include a workmanship warranty?

CSE advises receiving a 10-year warranty on workmanship. This is to protect against defects and undue degradation of electrical generation output.

Where can I find a contractor?

The best way to find a reliable contractor is to ask friends, business associates or others in your industry that have had solar PV installed.

Before you can legally begin installation, your project will need a building or electrical permit from the city or county building and safety department. Once you obtain the required permits, a commercial installation timeframe is based on the size of the solar system. Typically, a minimum of two installers are on-site during an installation, but there can be more depending on the size and scope of an individual project. Some steps in the installation process can be completed simultaneously and most will be taken care of by your contractor.

Once your system is installed, the city or county will inspect it. After your new system passes this initial inspection, your local utility also may inspect the system to ensure it is interconnected to the electrical grid properly and meets all safety requirements. Be sure to keep your system off until you receive official permission from your utility to begin operation.

Typical Solar Installation Process

Steps

Role

1.

Research contractors and compare bids

Customer

2.

Design system (site visit and usage evaluation to determine size)

Contractor

3.

Sign contract*

Customer

4.

Apply for building permit with appropriate city or county

Contractor

5.

Install the solar PV system

Contractor

6.

Apply for interconnection; submit application to your utility

Contractor

7.

City/county on-site system inspection; submit approval to utility

City/County

8.

Utility on-site meter inspection

Utility

9.

Turn system on upon written approval from utility

Contractor

10.

Receive first postinstallation utility bill under net energy metering

Customer

* Discuss and clarify roles with your contractor before finalizing the contract to ensure you understand who is responsible for each step in the process.

System Costs & Incentives

The price of a photovoltaic system is determined based on a number of factors, including system components and configuration, the difficulty of installation and available incentives.

The current average installed cost $/watt for a commercial solar electric system is between $2-4/watt.

What are the current state and federal incentives?

A one-time federal investment tax credit (ITC) is available for commercial solar PV systems. If the system is placed in service before Dec. 31, 2019, a federal tax credit of 30% of the total system cost is available. After Jan. 1, 2020, the tax credit will start to decline. After Jan. 2022 the tax credit will stay at a permanent 10% of the total system cost for commercial systems.

Federal Investment Tax Credit

Placed in Service

Tax Credit Percentage

By 12/31/2019

30%

1/1/2020 – 12/31/2020

26%

1/1/2021 – 12/31/2021

22%

1/1/2022 - on

10%

Note: The business owner must have the tax appetite to utilize the credit, but it may be carried forward if not completely usable in the installation tax year.

Discuss the tax implications of a commercial project with a tax professional.

Depending on your local utility, there may be solar rebates available. Typically, they are based on the size of the system installed. For more information on incentives, visit DSIRE.

Net Metering

What is net metering?

This program is for customers who generate electricity by solar PV, wind or other eligible generating systems. If your system produces more energy than you use, you can earn bill credits for the excess power your system sends into the utility electric grid. You can later use that credit to cover cost of the power you may need from the utility at times when your generating system doesn't fully meet your electricity needs.

What is virtual net metering?

Virtual net metering in California is a special utility billing arrangement allowing energy generation credits from a single solar system to be shared virtually among multiple tenant accounts.

What are the benefits of Net Metering?

You can receive up to full retail value for the production of your systemNet metering allows you to use the power that your solar electric system generates to offset any consumption beyond what your system produces. The utility acts as a bank to store your excess production and then allows you access to that power to offset your own consumption. Check your local utility net metering rules to understand if there are additional fees or charges included in the service.

You can receive wholesale value for the annual excess production of your systemIf your solar electric system produces more kWh than you consumed in a year, your utility may purchase excess energy from you at a wholesale rate.

No need to store excess solar energy onsiteDue to the fact that you get credit for your excess power generation, it is not necessary to install a battery storage system. However, some may still decide to install a storage system to offset time-of-use rates, demand charges or for a battery backup. Through net metering, the utility acts as your “battery bank” and provides you credits for those solar kWhs.